Europe ends a year marked by discord with the United States over the war in Iraq, divisions among its own governments over the war and such issues as closer integration, and setbacks to the European Union's ambitions to one day rival the United States as both an economic and political power.

Only a year ago, Europe was riding high. The European Union had seamlessly introduced its single currency and sealed a deal whereby 10 new countries, most of them former communist nations, would join the bloc in 2004. But 2003 got in the way.

The portrait of one happy European family was soon torn apart by U.S. plans to invade Iraq, with Britain joining its trans-Atlantic ally in sending troops to fight and France and Germany leading international opposition to the war.

Backed by Italy, Spain and five other countries, including three future members of the European Union, British Prime Minister Tony Blair issued an open letter backing U.S. demands for swift action against Iraq in the bid to rid it of any weapons of mass destruction.

That was followed by a second pro-American letter signed by Eastern European countries on track to join the EU or the NATO alliance in 2004, further reinforcing the split between the pro and anti-war groups within Europe.

The divisions undermined the EU's ambition to forge a common foreign policy and spurred France into renewing its insistence that Europe should unite to counter American global dominance. But Britain, Spain, Poland and other Eastern European countries signaled that they preferred the traditional alliance with the United States, even though many of their citizens opposed the war.

While Europeans accused the United States of acting unilaterally, Americans questioned whether Europeans had the will to confront the new security challenges of the 21st Century.

EU Justice and Home Affairs Commissioner Antonio Vitorino says there is what he calls a basic misunderstanding between Europeans and Americans on how best to deal with those threats in the post-September 11 world.

"Americans think that we Europeans underestimate terrorism and the new threats," he said. "And, because we knew terrorism in the past, [that] we take it as business as usual. On the other side, one must recognize that, in important sectors of European societies, Europeans think the U.S. has overreacted to the terrorist threat and has put in danger some basic values concerning civil liberties and collective freedoms."

Jeffrey Gedmin, a U.S. expert on trans-Atlantic relations who heads the Aspen Institute in Berlin, argues that, while the economic and trade relationship between the United States and Europe continues to grow, the U.S.-European strategic partnership that was nurtured during the Cold War has changed, with Washington taking a much more global view as the world's sole superpower.

"The strategic center of our focus has shifted," he said. "We're thinking about the coming unification of Korea, the challenge of China, stability in the subcontinent between India and Pakistan. And strategically, Europe matters less. It's not irrelevant; it's a very important partner. But in relative terms to the past, it matters less."

Though the chill brought about by the war began to thaw at mid-year and EU governments concentrated on framing a constitution to underpin the expanding union, it wasn't long before they began bickering again.

As France and Germany fought to stave off recession and high unemployment, they ran up deficits that exceeded EU rules and effectively wrecked an EU agreement that limits government spending among countries using the euro. Not only that, but they were spared from disciplinary action over their excessive public debt.

Smaller countries that had adhered to the rules grumbled that the big countries were flexing their muscles, and the bad blood that flowed set the tone for a December summit that was supposed to approve the EU's first constitution.

That meeting collapsed when Spain and future member Poland refused to give up the disproportionate voting strength they secured three years ago, while France and Germany insisted that votes in EU councils should reflect population size.

European Parliament president Pat Cox warns that the constitutional limbo leaves the EU facing its biggest-ever expansion with no institutional changes to facilitate decision-making.

"Because an agreement today was not possible, it does not make an agreement less necessary," said Mr. Cox. "The European Union of 25 and more member states of tomorrow is ill-equipped with today's treaties to meet tomorrow's challenges."

But in their usual mix of idealism, recrimination and fudging, the EU leaders did finally agree on an issue that had been a source of trans-Atlantic and intra-European friction. Working around Washington's suspicions that moves toward an independent EU defense force would undermine NATO, they agreed, at Britain's insistence, to station an EU planning cell at NATO headquarters to run operations in which the U.S.-led alliance does not want to be involved. Outgoing NATO Secretary General George Robertson calls the plan good for the EU and good for NATO.

"I'm not worried about a European Union defense dimension because, if that brings more pressure to bear on countries to spend more on the capabilities that both the EU and NATO really need for the future, then that's good news for all of us," said Mr. Robertson.

At year's end, the capture of Saddam Hussein and hopes for improved security in Iraq further diminished lingering trans-Atlantic bitterness over the war. France and Germany agreed to work with the United States to reduce Iraq's huge foreign debt, though they are still resisting any involvement in the war-torn country until it has what they call a legitimate government recognized by the United Nations.